show- cause notice issued to some one other than proprietoe

[giri gattupalli]

respected sir,

good evening to all . a show cause notice is served to a person who is not a proprietor or a employ or who is not authorized person. communication not reached to proprietor and FORM DRC-07 raised eventually .and show -cause notice not uploaded in website or sent in authorized mail. the person who signed notice is not an employ or any authorization was not given by proprietor. what is way forward for proprietor please suggest.

thanking you

[Shilpi Jain]

If the person to whom the notice is given is not proprietor or employee or not an authorised person, then who is this person.

[giri gattupalli]

yes madam .in previous vat regime he use to go tax office to hand over papers or something else on behalf of proprietor . that all . no authorization in writing . department knows that he belongs to particuler firm only.

[Padmanathan KV]

Since DRC-07 is already issued, you have two options now:-

1. Challenge the entire proceedings before High Court since natural justice principles are not complied. High Court will normally direct the Proper officer to issue fresh SCN and give you a personal hearing.

2. You can file an appeal as well. You can argue on merits as well as raise an arguement that no opportunity was given.

The decision has to be taken based on quantum of demand, issue involved etc.

[KASTURI SETHI]

2020 (12) TMI 685 - ALLAHABAD HIGH COURT RATAN INDUSTRIES LTD. Versus STATE OF U.P.

 

[KASTURI SETHI]

Madam,

Better option is to file appeal with Appellate Authority. The departmental channel should be exhausted first.

Pl. go through the following judgement of Hon'ble Supreme Court :-

2021 (9) TMI 480 - SUPREME COURT ASSISTANT COMMISSIONER OF STATE TAX Versus COMMERCIAL STEEL LTD.

[KASTURI SETHI]

In this context, also read CESTAT Mumbai judgement in the case of SGL Carbon India (P) Ltd. Pune Vs. Commissioner, Customs 2023 (5) TMI 776-CESTAT Mumbai. Order dated 7.2.23. TMI ID 437969

[KASTURI SETHI]

Serving SCN upon another person is equal to non-issuance of SCN. Such adjudication order tantamounts to adjudication without issue of show cause notice. Gross violation of principles of natural justice. In the absence of SCN, Order-in-Original is legally invalid. SCN is the very much basis of any Adjudication Order.

[KASTURI SETHI]

In this context, also peruse an article titled as, 'Show Cause Notice' authored by Dr.M.Govindarajan, Sir and displayed in TMI on 14.5.2016.

[giri gattupalli]

my sincere thanks to all of our panel members. discussion is very useful and educative also.

thanks once again. and keep this query open for discussion

thanking you

[Padmanathan KV]

Learned Kasturi sir,

Going through appeal route, the client will have to deposit 10%. If demand is high-pitched, then pre-deposit can be in lakhs. In such cases, filing a writ and getting the matter remanded back to Proper officer can be efficacious.

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

(1) It is not a question of the amount of pre-deposit whether it is small or huge amount. It is a question of legal route.

(2) Otherwise also filing a writ petition in the High Court is costlier than filing an appeal with the Commissioner (Appeals). There is a great gulf between Advocate's fee for filing writ petition in the High Court and Consultant or Advocate's fee for filing an appeal with the Commissioner (Appeals).

(3) Time to be taken for decision by High Court is longer than that of appeal in the department. The option for High Court is more stressful and exhausting as compared to filing an appeal.

(4) In this case, decision in favour of the party is certain, so the amount of pre-deposit will be refunded along with interest from the date of deposit.

CASE LAWS ON THE ISSUE

(5) (i) Direct entry into High Court is not allowed------Orissa High Court in the case of Sri Muna Pani Vs. State of Odisha -2022 (11) TMI 918 - ORISSA HIGH COURT. Displayed on TIOL on 28.11.22 Order dated 18.11.22

(ii) The judgement of Rajasthan High Court in the case of Malik Khan Vs. C CE Jodhpur reported as 2023 (5) TMI 883- Raj.HC. based on the Supreme Court judgement reported as 2020 (5) TMI 149-SC. in the case A.C.(CT) Vs. LTV Kakinara & Others.

(iii) There are instances where direct entry into High Court was allowed but that is rarest of rare cases.

[KASTURI SETHI]

Adjudication Order served upon 'kitchen boy'. Order set aside. Strictures passed against erring officer.----Supreme Court judgement reported as reported as 2015 (7) TMI 894 - SUPREME COURT SARAL WIRE CRAFT PVT. LTD. VERSUS COMMISSIONER CUSTOMS, CENTRAL EXCISE AND SERVICE TAX & OTHERS

[GUNASEKARAN K]

Demand order not sustainable without issuance of SCN and fair opportunity to respond

The Hon’ble Allahabad High Court in M/S SKYLINE AUTOMATION INDUSTRIES VERSUS STATE OF U.P. AND ANOTHER - 2023 (1) TMI 379 - ALLAHABAD HIGH COURT quashed the demand order passed in Form DRC-07, by the Revenue Department, on the grounds that a notice in Part A of FORM GST DRC-01A under Rule 142(1A) of Central Goods and Services Rules, 2017 (“the CGST Rules”) was not issued. Held that, subsequent reminder would not have cured inherent defect in proceedings initiated against the assessee as the initiation of proceedings itself are bad, thus, the order passed consequent thereto will also fall.

Facts:

This writ petition has been filed by the Skyline Automation Industries (“the Petitioner”) challenging the order dated November 10, 2022 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) under Section 74(9) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). The Petitioner stated that in terms of the provisions of Rule 142(1A) of the CGST Rules, before passing any order under Section 74 of the CGST Act, a Show Cause Notice (“SCN”) in Part A of FORM GST DRC-01A is required to be issued, which was not issued to the Petitioner therefore, fair opportunity to respond was not granted to the Petitioner.

Issue:

Whether the non-issuance of SCN to the Petitioner violates the fair opportunity to respond?

Held:

The Hon’ble Allahabad High Court in the matter of M/S SKYLINE AUTOMATION INDUSTRIES VERSUS STATE OF U.P. AND ANOTHER - 2023 (1) TMI 379 - ALLAHABAD HIGH COURTheld as under:

• Noted that, for initiation of proceedings against the Petitioner a notice as provided for under Rule 142(1A) of the CGST Rules in Part A of FORM GST DRC-01A was not issued, which provides for communication of details of any tax, interest and penalties as ascertained by the officer.
• Stated that, any subsequent reminder will not cure inherent defect in proceedings initiated against the Petitioner.
• Relied on the judgment of Hon’ble Delhi High Court in GULATI ENTERPRISES VERSUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS & ORS. - 2022 (5) TMI 1137 - DELHI HIGH COURT, wherein on the identical facts, the SCN was set aside and the matter was remitted back to initiate fresh proceedings in accordance with law.
• Stated that, in the present matter, the only difference is that an Impugned Order has also been passed, which will not make any difference. As the initiation of proceedings itself are bad, the order passed consequent thereto will also fall.
• Quashed the Impugned Order.
• Permitted the Respondent to initiate fresh proceedings against the Petitioner in accordance with law.

Relevant Provisions:

Rule 142(1A) of the CGST Rules:

“Notice and order for demand of amounts payable under the Act-

(1A) The proper officer may, before service of notice to the person chargeable with tax, interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may be, communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A.”

[Ganeshan Kalyani]

How department will come to know that the email id or contact details existing in the Govt website regarding your GSTIN is changed or not existing. Only when a taxpayer informs or updates the information in the website or updates the department via letter they come to know as regard the person to whom the communications to be sent. If you had already informed and still the SCN or previous notices were sent to previous authorised person then you may write so in the appeal you will be filing. Or approach the officer and see the possibility to get the order revised.

[Padmanathan KV]

Learned Kasturi Sir,

I beg to differ with your views for the following consideration:-

A. Where the Department has grossly violated the basic principles of natural justice, why should an assessee suffer by way of pre-deposit? I personally do not feel it is fair.

B. Even going through the appeal route, cost is involved for:-

a. pre-deposit

b. filing appeal through professional

c. getting back the pre-deposit by filing refund, etc

C. As you may be aware, Writ jurisdiction under Art. 226 is maintainable for Violation of Natural Justice. The rarest of rare cases (which again facts needs to be checked) should not be yardstick to conclude appeal is better route. Almost all judges take violation of natural justice very seriously. Appellate authorities being Department officials may or may not view it that seriously.

D. If the assessee has merits (Eg: covered by Circular 183, etc), he can produce the certificate before Proper Officer on issuance of fresh SCN on direction of court. Otherwise also, he can pay the tax and interest within 30 days of fresh SCN and avoid penalty u/s 73.

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

It is for the querist to decide how to go ahead. All aspects are before her. I am not challenging your views.

[KASTURI SETHI]

Sh. Padmanathan Kollengode Ji,

If I do not agree with you on any point/issue, it does not mean you are in the wrong. It is our moral duty to make the querist aware of all the possibilities,risks, avenues, facets etc. of the issue/query.

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

Delhi High Court vide Order dated 8.8.23 entertained writ petition because of violation of principles of natural justice by the Adjudicating Authority. OIO and SCN both were set aside.

2023 (8) TMI 735 - DELHI HIGH COURT - M/S. CUTHBERT OCEANS LLP VERSUS THE SUPERINTENDENT OF CGST RANGE 109 DIVISION ROHINI

[Padmanathan KV]

Dear Katuri Ji,

Thank you for reaffirming. As you mentioned, we have tried our level best to put all the options for consideration of querist. I have high respect for your views on the subject matter. Thank you.

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

Thanks a lot for your compliments.

Now in a lighter vein : My name is Kasturi and NOT 'KATURI' as you have spelled. There is a world of difference between the two words. Now search the meaning of both words on google. Wrong spelling has reminded me of Shakespeare's famous dialogue in his play titled as 'Romeo And Juliet' . That is , "What's in a name ? That which we call a rose by any other name would smell just as sweet." Shakespeare has used this line to convey that the naming of things is irrelevant.

AI Summary

Violation of natural justice: improperly served show cause notices can invalidate tax adjudication and permit fresh proceedings. Service of a show cause notice on a person who is not the proprietor, employee, or authorised representative constitutes failure to issue the SCN to the person chargeable and breaches principles of natural justice; statutory notice requirements under the CGST Rules must be complied with, and failure cannot be cured by reminders or by subsequent adjudication. Remedies include departmental appeal (subject to pre-deposit) or writ relief to quash defective proceedings and secure directions to issue fresh SCN and afford a hearing; courts have quashed demand orders and allowed re-initiation in such circumstances.